Monday, October 25, 2010

Will health insurance become the new pension?

While it's too early to proclaim the demise of job-based (health insurance) coverage, corporate number crunchers are looking at options that could lead to major changes....At least one major employer has shifted a greater share of plan costs to workers, and others are weighing the pros and cons of eventually forcing employees to strike out on their own.

Employer-provided health-insurance coverage is fairly standard for full-time employees. But retirement pensions used to be fairly standard, too. Then the green-eyeshade folks went to work and now most of us in the private sector are in 401k-style retirement savings plans, and only government workers have pensions awaiting them.

The administration insists that private employers will continue to offer health-care coverage

"For many, many employers who cover millions of people, [the Affordable Care Act] increases the incentives for them to offer coverage," said Jason Furman, an economic adviser to President Barack Obama....Employers get to deduct the cost of workers' health care from the company's taxes. Take away the health plan and two things happen: Employers lose the deduction and they'll probably have to pay workers more to get them to accept the benefit cut. Not only will the company's income taxes go up, but the employer will also face a bigger bill for Social Security and Medicare payroll taxes.

Still, the idea in this job market that employers must offer this benefit in order to remain competitive doesn't seem persuasive.

Posted at 12:21:47 PM

Comments

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--The only reason employers pay for health care for their workers is a quirk that's from WWII. There was a wage freeze then & to keep their employees from leaving to go to higher paying war related jobs, companies added health insurance to their paychecks. That wasn't regulated. It's continued on as a benefit, but is slowing decreasing or not even offered to many workers today.
It would be great if they all dropped it, then we'd get single payer!

I completely agree with what Garry wrote above, ... except for the punchline. I think that many people on the right and the left agree that employer-provided coverage is a relic that we might be better off without. In my opinion, it would be great if employers stopped paying for health care so that we could pay out-of-pocket. That would allow us to have more control over how much of our salary we want to go towards health care and it would lead to a more efficient (and probably more innovative) health care market overall.

I think, eventully, except at the higher end of employment wage levels, you'll see insurance dropped from benefits offered. Over time, the costs to employees will continue to rise, as deductibles have already risen, and the coverage offered will decrease in scope. As insurance opportunities increase in the private sector, many employers will be dropping coverage, say, in five to ten years from now. Maybe, instead, employees will be offered a medical stipend in place of coverage, would that be tax deductible for employers?

I think the one thing proven by the employer covered health insurance model over the years is that it works. Everybody is covered, so the people with more health care needs are balanced by those with less. Isn't that he basis of the dreaded health care reform just passed?

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